Culbreath Isles Prop. Owners Ass'n, Inc. v. Travelers Cas. & Sur. Co. of Am.

• Decision Date: 22 October 2015
• Docket Number: CASE NO: 8:12–cv–2928–T–26EAJ
• Citation: 151 F.Supp.3d 1282
• Parties: Culbreath Isles Property Owners Association, Inc., and Orline M. Sidman, as Plenary Guardian and on Behalf of Phyllis Ann Kirkwood, and Florida Policyholders, LLC, Plaintiffs, v. Travelers Casualty and Surety Company of America, Defendant.
• Court: U.S. District Court — Middle District of Florida

151 F.Supp.3d 1282

Culbreath Isles Property Owners Association, Inc., and Orline M. Sidman, as Plenary Guardian and on Behalf of Phyllis Ann Kirkwood, and Florida Policyholders, LLC, Plaintiffs,
v.
Travelers Casualty and Surety Company of America, Defendant.

CASE NO: 8:12–cv–2928–T–26EAJ

United States District Court, M.D. Florida, Tampa Division.

Signed October 22, 2015

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Mark Paul Buell, Raymond T. Elligett, Jr., Shirley Thompson Faircloth, Buell & Elligett, PA, Ronald Edward Bush, Hughes Hamilton Rice, III, Bush, Graziano, Rice & Platter, PA, George A. Vaka, Vaka Law Group, James J. Wimsatt, Tampa, FL, for Plaintiffs.

Andrew V. Tramont, Jr., Bradley B. Aserlind, Paulino A. Nunez, Jr., Rodriguez, Tramont, Guerra & Nunez, PA, Coral Gables, FL, for Defendant.

151 F.Supp.3d 1284

ORDER

RICHARD A. LAZZARA, UNITED STATES DISTRICT JUDGE

THIS CAUSE was remanded by the Eleventh Circuit Court of Appeals for further proceedings consistent with its single-issue ruling that the fee judgments in the underlying lawsuits against the homeowners qualified as “wrongful acts” and thus are covered under the subject Non–Profit Management and Organization Liability insurance policy (“the Policy”) issued by Defendant Travelers Casualty and Surety Company of America (“Travelers”) to Plaintiff Culbreath Isles Property Owners Association, Inc. (“Culbreath”).¹ The case was reopened for further proceedings to resolve the remaining issues of Travelers' defenses to coverage and ultimately came before the Court for a nonjury trial from August 11, 2015, through August 14, 2015.²

Culbreath has now voluntarily dismissed its claims against Travelers regarding Richard and Nancy Lewis (“the Lewises”),³ leaving only Plaintiffs Orline Sidman (“Sidman”), as personal representative of the estate of Phyllis Kirkwood, and Florida Policyholders, LLC's (“FP”) claims against Travelers for resolution by this Court. The Court now has before it Sidman and FP's written closing arguments,⁴ Travelers' Post–Trial Brief and appendices,⁵ and the parties' respective reply briefs.⁶ Plaintiffs also request additional oral argument⁷ and Travelers opposes the request.⁸ The Court finds that the remaining issues in this case can be resolved without the need for additional oral argument. The greater weight of the evidence before this Court clearly demonstrates that the settlement agreement entered into by Culbreath and Buell & Elligett, P.A. (“B & E”), for the sum of $295,000 in attorney's fees for 350 hours of work (billed at $842 per hour) was not reasonable in amount and not reached in good faith. The Court, therefore, determines that the Florida state court judgment entered pursuant to that settlement agreement will not be enforced against Travelers.

Background Facts

On October 16, 2008, Culbreath sued property owners Phyllis Kirkwood (“Kirkwood”) and the Lewises, in two separate actions in the Thirteenth Judicial Circuit Court in Hillsborough County, Florida, alleging that the condition of their respective properties violated the Culbreath Isles Homeowners' Association's bylaws. Culbreath sued these parties under section 720.305, Florida Statutes, which contains a “prevailing party” attorney's fee provision. Thus, Culbreath was aware that if it lost these cases it would have to pay the prevailing Defendants' fees.

Kirkwood was represented by the B & E law firm, whose principal, Mark Buell (“Buell”), agreed to perform work on the case for $300 per hour. In her answer to Culbreath's complaint, Kirkwood demanded the attorney's fees she would incur in defending the action if she prevailed and

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asserted a counterclaim against Culbreath for slander of title. At Culbreath's request, Travelers appointed Litchfield Cavo, LLP, to defend Culbreath against the counterclaim. The Lewises filed a Motion to Dismiss on December 12, 2008, in which they requested an award of fees should they prevail. Culbreath did not make a claim for coverage of its exposure for the fees the Lewises expected to incur in defense of Culbreath's lawsuit.

On June 11, 2010, the Florida state court granted final summary judgment in favor of Kirkwood and the Lewises on Culbreath's claims against them, and Culbreath appealed. On June 23, 2010, Kirkwood and the Lewises filed their respective motions to tax fees and costs, arguing that: (a) they were entitled to fees as prevailing parties under Chapter 720, Florida Statutes, and (b) Culbreath's cases against them were frivolous and thus they were entitled to fees under section 57.105, Florida Statutes. For the first time, on July 20, 2010, over a year and a half after the Lewises demanded fees in their first motion to dismiss Culbreath's suit, Culbreath notified Travelers that it was seeking coverage under the Policy for the Lewises' fees.

On August 11, 2010, Buell wrote to Culbreath's counsel that Kirkwood had incurred fees of $87,357.50 through July 20, 2010, and that she would seek “a multiplier of approximately 2 to 2.5 consistent with Florida law.”⁹ The next day, the state court entered an order granting Kirkwood and the Lewises' motions for attorney's fees and costs, reserving jurisdiction to determine the amounts to be awarded.¹⁰

On November 4, 2010, Kirkwood entered Tampa General Hospital.¹¹ Sidman, her lifelong friend, testified that Kirkwood underwent surgery several days later, suffered a stroke, and was rendered generally unable to communicate with people.¹² Buell likely knew Kirkwood was ill, but there is no evidence that he ever visited his client in the hospital. Sidman testified that although she did not advise Buell of Kirkwood's hospitalization, she thought her husband had advised Buell that Kirkwood was “in the hospital, and this is what's happened[,]” after which Buell sent Kirkwood flowers.¹³ Sidman also testified that after suffering the stroke in November, Kirkwood's condition did not improve.¹⁴ On January 6, 2011, Sidman petitioned the Probate Division of the Thirteenth Judicial Circuit Court for appointment as Kirkwood's plenary guardian.¹⁵ On February 17, 2011, the Probate Court entered an order determining Kirkwood was totally incapacitated.¹⁶ The Court subsequently appointed Sidman as Kirkwood's plenary guardian¹⁷ After Kirkwood passed away on December 24, 2012, leaving no heirs, the Probate Court appointed Sidman as the personal representative of Kirkwood's estate on March 21, 2013.¹⁸

On December 23, 2010, prior to any hearing on the amount of the award of attorney's fees, the issue of the amount of fees between Kirkwood and Culbreath was

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resolved when Buell signed a “Joint Stipulation and Agreement” (“the Stipulation”) with Culbreath on Kirkwood's behalf, purportedly with her knowledge and consent.¹⁹ Pursuant to the Stipulation, Kirkwood waived her right to collect fees from Culbreath.²⁰ In exchange for this immunity, Culbreath agreed to the entry of a judgment against it in the amount of $295,000 “in favor of ... Kirkwood ... payable to Buell & Elligett, P.A.”²¹ Based on the terms of the Stipulation, Kirkwood agreed that she would not “execute upon, record, or otherwise act upon” that $295,000 judgment. Culbreath assigned to Kirkwood and B & E “the proceeds from any and all actions, causes of action, or rights it has against any person or entity, including ... Travelers.”²²

Therefore, by the terms of their Stipulation, Kirkwood gave up a definite executable judgment against Culbreath in exchange for a speculative claim against Travelers. Kirkwood relinquished the assured reimbursement of any fees she paid so that B & E could collect $295,000, fees that far exceeded what it billed. Along with the settlement, Culbreath, Kirkwood, and B & E executed a promissory note whereby Culbreath agreed to pay the latter two up to $50,000 (for “attorney's fees”) plus interest depending on how much Kirkwood recovered from Travelers.²³

On December 27, 2010, B & E delivered both the Stipulation and the proposed Consent Final Judgment to the state court judge and asked him to enter the judgment. In the Stipulation, Mr. Buell represented the following to the court:

11. Representatives. Each party to this Agreement represents and warrants to the other party hereto that such party has the full authority to bind it, and its successors and assigns, to the terms of this Agreement, and that the person signing it on each such party's behalf has been expressly authorized and instructed to do so by such party.

Each party to this Agreement represents to the others that they are entering into this agreement freely and voluntarily being fully advised of the legal effect of this document by their respective attorneys.²⁴

On December 29, 2010, the state court judge entered the Consent Final Judgment without holding a hearing.²⁵

While Buell represented Kirkwood in the underlying action, he represents Sidman in the instant case. He testified at trial about the progression and resolution of the underlying action, as well as his purported motives for settling on Kirkwood's behalf. He justified his actions in settling the case by pointing to Kirkwood's desire to end the lawsuit and have her attorney's fees paid, that...